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How to Manufacture Your Invention in China - lets go export!

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G u id e Bo oklet
How to Manufacture
Your Invention in China
Why Build Products In China?
How to Choose a
Manufacturing Partner:
China is definitely the place to build and
manufacture things in this day and age.
вЂў Where do you start? If an inventor is starting from
scratch and does not have an experienced team
who knows how to do this, the Hong Kong Trade
Development Council can be a helpful starting
point. This is a Hong Kong Government funded
trade promotion organization that charges the
subscribing vendor Chinese companies a small
fee for their participation. This group sponsors
tradeshows in HKG and in other world capitals so
that buyers can meet Chinese manufacturers and
sellers. The organizationвЂ™s ulterior motive is that
free trade allows the citizens of Hong Kong to enjoy
a first-world standard of living and they want their
agency to continue being the gateway into China.
Since the formal вЂњopeningвЂќ in 1979, China has developed into the workshop for the world. Nowadays
everything seems to be made in China. China is
now the manufacturing leader for consumer electronics, clothing, toys, kitchen wares and sundries. Their
explosive economic growth has spawned tens of
thousands of factories in the south of China (Guangdong province) and near the coastal cities such as
Shanghai and Qingdao. These businesses now
employ over 14 million workers and export billions of
dollars to the USA and the rest of the world. Many
of the Chinese factories hire young migrant workers
from some of the poorer rural Northern provinces.
ItвЂ™s a known fact that since the вЂњopeningвЂќ, many of
these businesses and their factories have grown
considerably in size and sophistication. For example, Apple Inc. builds much of their iPodВ® and
iPhoneв„ў products at a factory complex that employs 240,000 people in the South of China. However, there are thousands of other smaller factories
that employ dozens or hundreds of workers.
вЂў Alibaba.com is another very effective way to
start looking for partners. This Website does an
exemplary job of pairing manufacturing partners
and products with buyers from across the world.
вЂў Word-of-mouth recommendations are probably the most expedient way of uncovering
and vetting the right supplier. Partnering with
a company or person who works extensively
in this part of the world will be invaluable in the
quest to find the right fit. Much of the Chinese
business culture is based on connections and
personal relationships so one should become
familiar with and extensively study how these
aspects contribute to starting a successful
business relationship with a manufacturer.
Another contributing aspect to the Chinese manufacturing success is their countryвЂ™s willingness to
invest in infrastructure (ports, roads, rail lines, etc.).
This has grown in parallel with the nationвЂ™s university
and technical schools that have turned out large
numbers of engineers, technicians and business
people to support this global juggernaut. Admittedly, in certain parts of the manufacturing sector,
the country is struggling with overly crowded roads,
environmental pollution and corruption, but great
strides have been made over the recent years.
Yes, itвЂ™s all there but finding the right partner is
very challenging and nuanced with subtleties
and cultural, logistical and business obstacles.
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AbsolutelyNew, Inc. вЂў 650 Townsend, Suite 475 вЂў San Francisco, CA 94103 вЂў 1-888-9INVENT вЂў www.absolutelynew.com
вЂў Meeting and knowing your manufacturer via
face-to-face meetings is very important. When
one visits the offices and factories, it leaves an
impression of someone who has serious intent
of developing a relationship and is willing to
spend money to make sure the deal is done the
right way. Having a presence over there plus
these face-to-face meetings are costly, but it can
be summed up with the famous saying вЂњseeing once is worth hearing a hundred times.вЂќ
вЂў Trading companies versus dealing direct. Trading companies assist with sourcing and can be
helpful with navigating the hurdles of a manufacturing partner relationship. There are many
well-established and trustworthy firms that are
genuinely experienced at doing this. In general, they charge up to 10% of the FOB price for
this service and the bigger trading companies
are sometimes not easy to work with since they
only want well-established businesses of sizable
proportion. If one finds the right trading company
partner, they can be very helpful for the first-time
transactions. A downside is that trading companies will point business only to a handful of their
own hand-selected manufacturing partners who
many times are not the lowest price producers. It
is best to do oneвЂ™s own experimentation to find out
if trading-company arrangements suit your needs.
вЂў The importance of language skills and US or
UK degrees. Many trade experts believe that a
manufacturing partner that has an executive and
administrative staff that speaks and writes fluent
English will make it much easier for you to do
business. Both verbal and written communications are important and many times will make or
break a successful partnership. A good barometer for success will be if the staff attended schools
in the US or UK. Speaking Mandarin and Cantonese is surely valued, but not necessarily a primary
requirement for doing business in this part of the
world. English has emerged as the language for
international trade and the better manufacturing
candidates know this. Expect to give them your
SKYPE account and be ready to exchange documents via email with PDF attachments. Having
a password-protected FTP site where one can
exchange sketches and drawings, design files,
product specifications and business documents
is very common with China in this day and age.
вЂўISO 9000 certified factories. This is often an
indicator of a partner worth considering. Briefly,
ISO 9000 (International Organization of Standards)
certification means that the factory has professionally recognized processes and controls in
place to make consistently good products. These
factories are often of a higher caliber for consistent quality and one has a better chance of ontime delivery. Factory certification is a costly and
daunting process and it typically takes two years
to achieve. It requires trained management staff
along with regularly scheduled compliance audits.
ItвЂ™s typically a good indicator of a professionally
run factory that one can feel better about with regards reliable product quality and delivery performance. Big Box retailers like to hear about these
factories since they usually have lot traceability if
something such as a recall happens. ItвЂ™s wise to
check how current their ISO 9000 certification is
since some factories will say they have it only to
get your interest. ItвЂ™s sometimes only used as a
marketing tool. If certification is not registered and
maintained, then there may be reason to suspect
that something is not quite right with the factory.
вЂў What about samples? Who pays and how
is this done? It is common practice to offer to
pay for samples and shipping charges to your
office while one is becoming acquainted with
a prospective partner. After the first deal, it is
appropriate to let the vendor pay for any future
product offerings. Have ready and expect to give
your UPSВ® or FedExВ® account number and your
Telex Transfer bank-account information when
this issue arises during the initial meetings.
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AbsolutelyNew, Inc. вЂў 650 Townsend, Suite 475 вЂў San Francisco, CA 94103 вЂў 1-888-9INVENT вЂў www.absolutelynew.com
вЂў Social-accountability surveys. Nobody, especially
US-based retail buyers, want to be remotely associated with bad social-accountability practices.
In the past year alone, the press has been filled
with stories of how lead paint was used in toys.
Chinese manufacturers were accused of making toothpaste adulterated with propylene glycol
(antifreeze); melamine was discovered as a toxic
additive in dog food. This went hand-in-hand with
bad press for ChinaвЂ™s subservient labor practices,
unsafe working conditions, overtime abuse and
employing underage workers. Most US importers are now asking for evidence of social accountability, whether it be a full-blown SA8000 (a
global social-accountability standard based on
the UNвЂ™s declaration of human rights) report or a
supplier survey that an independent inspection
company can provide. These surveys range in
price between US$2K to $18K and the better quality, professionally-run factories generally are very
familiar with the social-accountability questions. It
is best to keep your distance from factories that
are unfamiliar with social-accountability issues.
Hint: Arrange your own personal factory visit and
ask if an independent survey can be done.
If the male workers out number female workers in an
electronics assembly factory, then this usually means
the factory is struggling with hiring qualified workers. It may have quality problems. ItвЂ™s a commonly
held belief in China that female assembly workers
are widely preferred since their manual dexterity is
better and theyвЂ™re easier to motivate. Male assembly
workers are considered not as good in this situation.
Ask for the ratio and the factoryвЂ™s explanation for this.
If workers do not use eye or foot protection in metal
stamping or printing plants, then it is best to ask the
factory why and consider avoiding this factory. If workers are painting, immersing items in liquids or cleaning parts in solvents without protective equipment
and ventilation, then it is best to avoid this factory.
Many times visitors will now ask to prove the date
of birth of randomly selected younger looking
workers. ItвЂ™s good practice to question this and
check for this during the introductory factory tour.
If the factoryвЂ™s assembly stations have standardized instruction cards posted over each individual
workerвЂ™s station, then that is usually a good sign
for achieving good quality. ItвЂ™s a sign of welltrained workers and good factory process control. In addition, rubber floor mats for workers, air
conditioning and a low noise work environment
are indicative of a better-than-average facility.
вЂў Tell-tale signs of a good factory. As expected, common sense prevails and here
are a few of the easy ones to spot:
Obviously, if the factory is clean and well-organized,
itвЂ™s a very good first sign. If the management has
lined pallet spots for storage on the floor or has вЂ�Five
SвЂ™ posters and signage espousing Japanese factory
practices, then this is better than very good. Note
that вЂњ5SвЂќ is a structured program that was developed by the Japanese to achieve total organization,
cleanliness and standardization in the workplace.
If there is apparent supervision (as indicated
by different color smocks) and obvious qualitycontrol inspectors patrolling the factory floor,
then consider this is a good indicator of a better quality factory. Ask questions about the
number and percentage of QC staff for the factory. The ratio should be between 6 and 10%.
If the factory line has a formal looking chalkboard or lighted display with metrics on the number of parts made each hour and the number
of rejects found, then that is a positive sign.
If you smell paint, solder fumes or VOC (volatile
organic compounds) or notice a conspicuous presence of dust in the air, then this is not a good sign.
It is best to ask questions about respirators and
eye protection since these factory conditions wonвЂ™t
pass the most basic social-accountability audits.
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AbsolutelyNew, Inc. вЂў 650 Townsend, Suite 475 вЂў San Francisco, CA 94103 вЂў 1-888-9INVENT вЂў www.absolutelynew.com
Ask frequent questions about line rejects and how they
are handled. If they show you a process for handling
line rejects, then itвЂ™s indicative that theyвЂ™re looking
for ways to continually improve their process quality
which is very desirable in any manufacturing partner.
sation. The basic rule of thumb is that a utility
patent affords stronger protection than a design
patent. The advantage is that your utility patent
assures the USA buyer of the productвЂ™s unique
and proprietary features. Note that your patent attorney must continue to maintain the registration
and strengthen the patent by continually building
in protection. These are costly propositions but
this is what constitutes a viable patent strategy.
Ask if the factory has a backup power generator. Even the better small-size factories have one
because weekly municipal power outages are
very common in China. During summer months,
it is not uncommon for small factories to have
brownouts two or three days every week.
вЂў WhatвЂ™s required to build tools in China?
Who pays what? Building a tool in China is now
relatively cheap and easy. A simple plastic-injection
molding tool can be built many times with only
a napkin sketch and a product specification. ItвЂ™s
always better to have a professionally produced
rendering via an industrial-design engineer since all
Asian countries now use the same design software
that is used in the USA. Such design programs as
AutoCADВ®, SolidworksВ® and Pro/EngineerВ® are sold
worldwide. In some cases, they are illegal copies
of the software so beware of corrupted and virusprone files when you exchange them with your Asia
partner. A plastic-injection mold for a toy will typically take 60-75 days to build. ItвЂ™s a common practice
to put 30% upfront and pay the 70% balance of
the tooling upon receipt of the first off-tool sample.
For reference, the tooling cost for a simple plastic
object the size of a baseball would be between US
$
15,000 and $25,000 depending on the number of
cavities and the type of surface finish (mirror finish
versus EDM textured finish) and internal complexity.
вЂў Ask about recalls, returns and defective
allowances. Recalls happen often. Check the
CPSC (Consumer Product Safety Commission)
Website and youвЂ™ll see thousands of instances of
recalls with products that originate in China. Ask
your manufacturing partner how one receives restitution for these possibilities and other field-quality
failures, including oversights in manufacturing.
Most USA-based retailers will insist that sellers
prove you can stand behind the products as part
of the deal. Many Chinese makers will be reluctant to take back returns so ask for a 2-5% defective allowance that will cover any returns. With
every deal one does with a USA-based company,
returns will always be part of the negotiations.
вЂў What about intellectual property issues? Getting a USA patent is good practice but the grim
reality is that it does not guarantee you 100%
protection from being copied or вЂњknocked-offвЂќ
especially in China. If your product has a novel
design or application, it is best to assume that it
will be quickly copied in China. It is not uncommon to see a knock-off as soon as 90 days
within the release date in the USA. Having a
separate Chinese patent is helpful and requires
legal help. But note that ChinaвЂ™s patent-protection
system is in its infancy and flagrant examples
of copied products abound. The penalties in
China are very weak and itвЂ™s not uncommon for
a rogue knock-off factory to restart production
in the next few days after discovery and ces-
вЂў Does quality matter? Yes, one can get a wide
variance of prices that are quality dependent. Ask
the factory for their operating AQL (Acceptable
Quality Level). If they are familiar with this term and
the term вЂњMil Std 105D,вЂќ then that means that they
have some knowledge of what your quality expectations will be. A typical starting AQL at 2.5 Major
defects and 4.0 Minor defects is typical for inexpensive consumer products. A tightened or higherquality standard is represented by asking for
AQLвЂ™s of 1.0 for Majors and 2.0 for Minor defects.
This stricter quality level will usually cost more.
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AbsolutelyNew, Inc. вЂў 650 Townsend, Suite 475 вЂў San Francisco, CA 94103 вЂў 1-888-9INVENT вЂў www.absolutelynew.com
вЂўHow do you benchmark quality of your
products? Briefly, one would typically write a technical document called an Inspection Specification that
lists all the quality aspects of the product, including
functional, cosmetic and packaging issues. The
idea is to share this document with the manufacturing partner and have them agree with the contents
and sign off on it. This will then be the document
that benchmarks the quality level that one is buying.
вЂўAre safety and reliability tests necessary?
Independent testing is the prudent thing to do.
Most USA-based retail buyers are now very
cautious and mandating testing because of
the recent uproar about Chinese-made products and safety issues. Many retailers are demanding pass-thru liability insurance which
exonerates them from any legal liability.
вЂўWho usually pays for inspections? ItвЂ™s a
common practice that the importer pays for the first
factory inspection and the factory pays for all the
subsequent orders. HereвЂ™s a pricing example for the
inspection costs: The cost to do a FRI in the South
of China at 2.5/4.0 AQL for a 5,000 piece lot will
cost about US$1,000, including some nominal travel
expenses to/from the factory for a simple plush toy.
вЂўCheck quality by arranging a third party
quality inspection. Most companies that import
goods from Asia conduct a Final Random Inspection (FRI) of the finished order before it is shipped
from the factory. This must be agreed upon up
front in your negotiations with the manufacturer.
There are many large and small contract inspection companies that can be readily found on the
Web. On the appointed day, the contract inspection company will take random samples from the
staged shipment at the factory. They compare
these random samples with a standard sample
and the Inspection Specification mentioned above.
The inspection company will then provide a written
report of the findings usually within the same day.
If the shipment complies, the goods are allowed
to ship from the factory. The Inspection Company
will normally provide a certificate to you attesting
that it has passed inspection based on your spec.
If it fails inspection, one of three things happens:
The Commercial Side of
Buying Items in China:
вЂўHow much do you buy? WhatвЂ™s the MOQ?
When negotiating for information and pricing,
one of the first discussion points is вЂњMOQвЂќ or
Minimum Order Quantity. The short answer
is usually one 40-foot sea container since
that is a typical benchmark on both sides of
a typical transaction. One can usually negotiate trial-order quantities of less than one 40-foot
container loads but expect it to cost more.
1. The shipment is accepted anyway,
вЂў Check references. Ask the manufacturer or
trading company for a list of their incumbent
USA-based clients. ItвЂ™s always appropriate to ask
how many years the factory has been in business and how many workers are employed in
their business. Ask if the factory is a joint venture
and if they are the principals. Check their references via Dunn & Bradstreet. Word-of-mouth
recommendations from seasoned importers goes
a long way to getting a quality, reliable supplier
who will deliver on time so one can get paid.
2. The factory must re-work the goods and
arrange re-inspection on their account or
3. The goods are discarded and the
deal does not consummate.
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AbsolutelyNew, Inc. вЂў 650 Townsend, Suite 475 вЂў San Francisco, CA 94103 вЂў 1-888-9INVENT вЂў www.absolutelynew.com
commonly refers to paying at the time of shipment
with no upfront money down. These usually happen only after a well-established relationship is
created and it proves itself through 4-6 transactions
where timely payments are made. If one is repeatedly late with TT payments, donвЂ™t expect вЂњopen
accountвЂќ payment terms. For smaller transactions
and sample payments, it is common to use PayPal.
вЂў How do you ship products once theyвЂ™re made
in China? The factory will ask for the name of
your freight forwarder so one must arrange this in
advance. The Web has hundreds of listings for
вЂњInternational Freight ForwardersвЂќ who service the
logistical needs of companies that import from
China. Rates vary widely and can include factory
door to USA customer delivery. Customs brokerage
can also be included and requires signing a power
of attorney and arranging for a continuous US Customs bond. This coverage can be purchased on
an вЂњas-neededвЂќ basis. Some of the bigger names in
logistics or freight forwarding include UPSВ®,
Expeditors InternationalВ®, Panalpina and DHLВ®.
вЂў What is a вЂњproforma invoiceвЂќ and what is it
used for? This is a key document that states
all the terms of the deal that one strikes with the
manufacturer. It always includes date, FOB price,
payment terms, delivery date, quantity, item description, ship to and from addresses and contact
information. It should have a signature and
company seal called a вЂњchopвЂќ to be an official
document. This will be the basis for writing a
purchase order. Many times this document
acts as a sales confirmation document and you
will be requested to carefully review and sign.
вЂў International freight forwarders and steamship companies. International freight forwarders
handle all aspects of transportation including
airfreight, China truck transportation, freight consolidation and customs brokerage. They buy
large allotments of container ship space in advance and then mark the space when it is used
by customers. They are also called вЂњNVOCCsвЂќ
which means Non-Vessel Owning Common
Carriers. Examples are Panalpina and Expeditors International. Steamship companies own
the container ships. Some of the more familiar
names are companies like APL, Maersk, MOL,
Hanjin and COSCO. One deals directly with them
only when purchasing a large quantity of sea
containers on an annual contract basis. Usually the minimum amount considered for a contract is 500-600 40-foot containers per year.
вЂў Issuing the manufacturer or trading company
a purchase order. The proforma invoice is
used to issue a purchase order which spells out
your delivery terms and conditions. If your USAbased client requires special packaging and
multiple delivery destinations, then it would be
included on the purchase order. It is common
for the purchase order to include a section with
legal вЂњboilerplateвЂќ that protects the USA-based
buyer and includes insurance liability, cancellation privileges and defective allowances.
вЂў Important: letters of credit or open-account payment terms, PayPal and TT payments.
Nobody in China likes to pay banking fees. The
first order will many times be on LC since you are
an unknown customer. Some will allow 25-50%
down at time of issuing the purchase order and the
balance upon shipping the goods. The payments
in this case are made via Telex Transfer, which is
also referred to as a Wire Transfer. вЂњOpen AccountвЂќ
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AbsolutelyNew, Inc. вЂў 650 Townsend, Suite 475 вЂў San Francisco, CA 94103 вЂў 1-888-9INVENT вЂў www.absolutelynew.com
вЂў What does it cost to ship via sea? As of June
2008, it costs about US$2,800 - $3,000 to ship one
40-foot container of general consumer products
from Yantian, China (a major south China port that
is near Hong Kong) to the West Coast. Add an additional $900 - $1,500 for inland delivery. Customs
brokerage adds $125. ItвЂ™s good practice to get a
detailed quote from the freight forwarder so that
all costs are known. Note: The skyrocketing cost
of oil impacts the cost of all forms of transportation so price adjustments happen very often.
вЂў What happens if you have to ship something
via air? This is a very expensive option. A good
rule of thumb is to multiply the sea freight cost
per unit by ten. It is wise to become familiar
with the air freight costs early on since many
retailers will tell the Chinese factories that they
will have to pay for air if they are late with the
specified delivery to avoid PO cancellation.
вЂў What documents are required for importing
goods into the USA? The three primary documents needed for any import transaction are:
1.The Commercial Invoice which describes the
goods, the quantity and the US Dollar value defined in units, unit cost and total value. Both sea
and air shipments must have this document.
2.The Packing List with details of the weight, box
dimensions and contents of the shipment. Both
sea and air shipments must have this document.
3.Bill of Lading. The document that has the
transportation details, ship name and voyage,
and port of origin and destination port. For air
shipments, this is referred to as an airway bill.
вЂў What happens if you donвЂ™t follow the rules with
Customs? Honest information is essential since
the US Customs Service is part of the Department
of Homeland Security which is rightfully nononsense and very enforcement-minded. Importing parties are expected to be fully cognizant of
the laws governing international trade (informed
compliance) and fully disclosing of all aspects of
the transaction (reasonable care). Failure to abide
with the rules can lead to delayed delivery of the
shipment or, in the worst case, confiscation and
destruction of the imported shipment. Customs
has the right to sample any shipment, inspect or
confiscate any box, parcel or sea container with
immunity. The samples they take are not paid for
and Customs can take as many as they deem
necessary. One must take any US Customs issue
very seriously since the penalties for misstating
information to them can result in loss of importing privileges. US Customs tries to do intensive
exams (customs inspections) on 15% of the import
entries into the USA. Sometimes these exams
are as brief and simple as double-checking the
paperwork (manifest review). Sometimes the exams are a thorough inspection of every carton in
a 40-foot sea container. Customs keeps extensive
вЂў US Customs and the Department of Homeland
Security. Before one starts importing goods
into the USA, it is imperative that a relationship
with a registered customs broker be established.
Most major freight forwarding companies also
do customs brokerage as an add-on service that
is sometimes called a CHB (Customs House
Broker). These brokers will prepare all the appropriate forms to allow the imported goods to be
вЂњentered into the commerce of the United States.вЂќ
This service is done for a fee that is volume
dependent but $200 is a typical fee for a small
importer who is bringing in one load of goods.
Custom House Brokers will ask many detailed
questions about the factory, the item, costs and
parties associated with the import transaction.
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AbsolutelyNew, Inc. вЂў 650 Townsend, Suite 475 вЂў San Francisco, CA 94103 вЂў 1-888-9INVENT вЂў www.absolutelynew.com
What is a customs bond?
records of every aspect of every import transaction and they have a sophisticated algorithm
for selecting which entity gets inspected. This is
kept confidential from the trading community.
вЂў What is a customs bond? This bond is similar
to an insurance policy that is imposed by US
Customs for guaranteed payment of the duty. If
for some reason, the importer does not pay the
duty, or is assessed a penalty or additional duty
long after the original duty amount has been
paid and he is no longer in business, or unwilling/unable to pay, the Customs Bond Company
has the obligation to pay US Customs. In other
words, if Customs has not been paid after a
certain period of time, they will demand payment
from the Bond Company. US Customs requires
that all formal entries (anything with a value over
$
2,000) have a Customs Bond. As an example
for cost reference, it can cost several hundred
dollars for a typical shipment valued at $40,000.
вЂў Did you pay an agent a commission? This is
one of the most common mistakes on international transactions. If the importer paid agency
fees or assistance, then it is important to declare
the amount of the agency fees on the transaction on the commercial invoice and fully disclose
this information to US Customs. The duty rate
that the importer pays must include this agency
fee. Hiring a good customs broker can help
one steer clear of this very common oversight.
вЂў HT numbers and duty rates. All commodities
entering the commerce of the USA has a HT
or Harmonized Tariff number that oneвЂ™s custom
broker will help assign at the time the import
paperwork is submitted to US Customs. This
is a code number that is ten digits long and is
always associated with a tariff rate, depending
on the country of origin for the products being imported. Assigning the correct tariff rate is
best left to professional customs brokers who
know how to decipher complicated tariff manuals that require continuous updating, based on
the changing international trade landscape and
a host of punitive tariffs. It is best to double-check
on this prior to shipping anything from any overseas factory. Some very common items such as
candles and flashlights to name a few, have had
very high tariffs because of industry protection
measures initiated by US-based companies that
in some cases exceeded 25% of the FOB value.
вЂў Delays of delivery. As mentioned above, US
Customs intensive exams can result in delays in
delivery to the customer. There are many other
factors that also contribute to delivery delays and
one should be familiar with them to realize the
scope of risk associated with importing items into
the US. Delays have been attributed to typhoons;
earthquakes on both sides of the world; labor
unrest and Iraq War protests at USA ports; longshoreman union strikes; under capacity on US
railroad lines; snowstorms; US Customs Sequestration when budgeting funding is not approved;
holidays in China; container availability; annual
three-week factory shutdowns for Chinese New
Year. Remember that big retail buyers always
have charge-back clauses for late delivery so it is
best to be prepared for the possibilities of delays
since they always pop up when least expected.
вЂў How much time does it take to ship things?
One will hear that those container ships keep
getting bigger and faster every year. Sea shipments from Yantian in the south of China to Long
Beach, California can make the 6,000-mile journey in less than eleven days, but allow extra time
for transit from the factory to the piers. There are
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AbsolutelyNew, Inc. вЂў 650 Townsend, Suite 475 вЂў San Francisco, CA 94103 вЂў 1-888-9INVENT вЂў www.absolutelynew.com
Conclusion
now new government security clearance requirements called C-TPAT (Customs-Trade Partnership
Against Terrorism) at foreign ports and this approval usually takes a few extra days. Once the
goods arrive, the containerized goods need to be
removed from the ship, placed on a truck chassis,
staged for clearance and then finally sent to the
preferred destination. This takes a few more days
depending on which steamship line and/or trucking company is used. Most times, this is very price
dependent. As a general rule of thumb, it takes
28 days from the Chinese factory door to westcoast addresses, 33 days for the Midwest and 38
days for east-coast customer destinations. And
lastly, it is an accepted practice that truckers make
appointments for delivery at the final destination.
WhatвЂ™s required to get paid for all of this?
One prepares an invoice with all the correct
delivery documents to the retail buyer typically with 30- to 60-day payment terms.
HereвЂ™s the difficult thing to grasp: Once the goods
are delivered to the buyerвЂ™s warehouse, you, (the
importer) have already paid the factory for the product. The inspection company will have been paid
by you and the freight forwarder has already been
paid. US Customs has received their payment
for the tariff duty and processing fees. Now you
have to wait for the notoriously slow-paying retail
buyer to send you the check, which will many times
have deductions for those nasty charge backs.
вЂў What happens if youвЂ™re late delivering to your
customer? One will be forced to pay charge
backs for any mistakes. Many of the major retailers have vendor-compliance manuals online.
These are usually lengthy documents that spell
out the requirements for doing business with
them. Instructions for box and product labeling, domestic freight-carrier information, invoice
procedures, case pack information, etc. are in
these manuals. There is usually a page or two
with the penalties for such things as late delivery,
wrong box markings and incorrect information of
the shipping documents. вЂњThe SellerвЂќ is responsible for everything that can go wrong and the
USA-based retail buyer has the right to cancel
the order, so be aware of this. Consider enlisting
professional brokers and logistics service providers
so you can avoid these penalties. Also remember
to negotiate charge-back concessions with the
factory so as to minimize the impact of them.
Building and importing from China or anywhere else
is definitely not an easy task for the faint of heart. An
individual inventor who decides to develop his product on his own is guaranteed to be faced with these
numerous obstacles that require not only a war chest
of upfront funding, but a team of professionals who
know how to work with the complicated network of
foreign manufacturing and logistics concerns. ThatвЂ™s
why licensing a product and getting a simple royalty
is strongly preferred by those who are
undercapitalized.
About The Author:
Tom Krysiak
Senior Vice President of Operations
Absolutely New Inc.
Tom Krysiak has more than 20 years of experience in product
sourcing, product development, international purchasing,
logistics and operations. Prior to joining AbsolutelyNew, Tom
was Senior Vice President of Manufacturing & Quality at The
Sharper Image, where he worked for ten years, delivering more
than 200 proprietary products, with gross margins exceeding a
billion dollars over the last six years.
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AbsolutelyNew, Inc. вЂў 650 Townsend, Suite 475 вЂў San Francisco, CA 94103 вЂў 1-888-9INVENT вЂў www.absolutelynew.com